IS REMODELLING A GOOD INVESTMENT?

In 2005, the average return on a remodelling project was in the high 90 per cent. At the same time the average cost of a kitchen remodel nationwide was $108,000. Last year, housing sales and remodelling slowed. Returns on remodelling investment in 2006 had plummeted from the 90s to the 70s, a whopping 20 per cent drop.

Remodelling is still going strong, but with the slowdown in new home sales, most consumers have become reluctant to invest in higher-end products - expensive finishes such as fancy faucets and flooring, for example.

The word among those in the industry is: Don't expect customers to pay US$700 to $900 for a faucet, because the ones most desired now are closer to the middle in price, $200 to $300. We have trouble believing that anyone would spend more than $200 on a faucet anyway. Nonetheless, now you know the industry buzz.

Keep in mind that our faucet example also applies to finish choices folks are making as they remodel. Other features and finishes offered at the upper end of the price scale included expensive tile and custom hardwood floors, and bathrooms with fireplaces.

But is remodelling still a good investment?

You bet, as good as ever. However, you may want to think out exactly what you want to spend on your remodel before making the final decision. Currently, more modest investments in finish items are getting the best return. Our recommendations:

- Before tackling any major remodelling project, first invest in safety upgrades. Make sure that your electrical and gas systems are in premium condition and that they comply with the most current electrical and plumbing codes. Ask your local building department to inspect your home and advise you on what repairs will make your home safest for you and your family. You may have to pay a small fee, but nothing like the cost of losing your home to a fire or an explosion.

- Don't forget smoke alarms and carbon monoxide detectors. If you don't have them, add them. If you do have them, bring them up to date - smoke detectors stop detecting after 10 years.

- Next, comes energy efficiency: Invest in compact fluorescent light bulbs, furnace cleaning and maintenance, and appliance replacement - new ones are a great deal less expensive to operate.

- Finally, don't forget general home maintenance. A roof leak may cost $450 dollars to have repaired, but if left unchecked it could end up doing thousands of dollars in damage.

Remember that safety, energy and maintenance repairs are not considered remodels. A remodel is not tax -deductible against a home's capital gain. A repair is deductible. That's because a remodel is considered (by the government) as an improvement to conditions where a repair, even if it is an upgrade, brings the home back to its normal condition.

Once your home is safe, energy- efficient and properly maintained, remodel the master bath and kitchen. Of all possible remodels, they have always been top of the list. You'll never want to leave once those two areas of your home are up to snuff.

Source: Canoe Home & Garden